Contract of Sale
mainly discussed in Title IV (Articles 1458-1637) of Book IV of the Civil Code of the Philippines. A contract of sale is a contract or agreement wherein one party (seller/vendor) obligates himself to deliver and transfer something to the other party (buyer/vendee/purchaser), who, on his part, obligates himself to pay the price. Characteristics of Contract of Sale The common characteristics of contracts of sale are: *'Consensual' - wherein mere consent is sufficient to perfect such contract. *'Bilateral' - wherein both parties are mutually bound to each other; the seller delivers the thing sold, while the buyer pays the price. *'Onerous' - wherein one party performs his obligation with the expectation that the other party will perform his obligation in return. *'Cummutative' - wherein the thing sold is considered the equivalent of the price sold; except in the case of aleatory contract such as the sale of hope. *'Principal' - wherein the existence and validity of such contract does not depend on another contract. *'Nominate' - wherein the Civil Code gives special designation to such contract in 'Title VI: Sales'. Elements of Contract of Sale A contract of sale has the following essential elements: *'Consent or meeting of the minds' - the definite agreement between parties with respect to the thing (object) and price (cause); both parties having legal capacity. *'Object or subject matter' - the determinate thing to be sold. *'Cause or consideration' - the price certain in money or its equivalent. The contract will not be perfected unless the aforementioned elements or requisites concur. In addition, a contract of sale also has: * Natural elements - those which are part of the contract even if the parties do not provide (stipulate) them, and is presumed by law to exists; such as a warranty of hidden defects or eviction in contract of sale. * Accidental elements - those which are established or stipulated in the contract by the contracting parties as they may deem convenient; such as stipulations, clauses, terms and conditions. Transfer of Ownership The essence of sales is on the transfer of title (ownership) to property (object) for a price (cause), rather than a mere physical delivery. The purchase and transfer of title may only be done upon the existence of a contract of sale. The title shall pass the seller to the buyer upon the delivery of the thing or property. In cases concerning title (ownership), a contract of sale is: * inexistent, if the title to property remained in the hands of the same person, regradless of the change in the form of ownership. * inoperative or impossible, if the title to property is acquired by the buyer a third person and not from the seller. * illegal or void, if the transfer of title to property is not the intention of the parties from conception such as those entered merely to gamble on the rise and fall of prices. Effect of Absence of Price in Sale A contract of sale is void and invalid without a price as casue. Such sale is considered non-existent and non-consumable from conception. There is also absence of price in case of: * fake or fictitious price * fraudalent price; as in those prices that appear as paid but was, in fact, never paid. * mere estimates given by the seller. Effect of Non-Payment of the Price A contract of sale may be cancelled (by rescission) or continued (by specific performance) in case of 'non-payment of the price' (resolutory condition). The non-payment of the price in full within a fixed period can: * dissolve a contract of sale if there is any agreement that payment on time is essential. * default a contract of sale in the absence of any agreement that payment on time is essential; the default is on the part of the buyer, and legal remedies may be exercised by the seller. Kinds of Contract of Sale according to existence of conditions: *'Absolute sale' - not subject to any conditions whatsoever, and the transfer of title is upon the delivery of the thing sold. *[[Conditional sale|'Conditional sale']] - subject to certain conditions, and the transfer of title is upon the fulfillment of the conditions imposed. The kind of contract of sale may also depend on: *the nature of the object. (real or personal, movable or immovable) *the manner of payment of the price. (cash, credit, or installment) *the validity of the contract. (valid, void, uneforcable, or rescissible) Contract of Sale vs Contract to Sell in terms of transfer of ownership (title): *in a contract of sale, the title shall pass to the buyer upon the delivery of the thing. *in a contract to sell, the title shall remain in the seller and may only be passed to the buyer upon full-payment of the price of the thing. in terms of non-payment of the price: * in a contract of sale, the 'non-payment of the price' (resolutory condition) may cancel (by rescission) or continue (by specific performance) the obligation. * in a contract to sell, the 'non-payment of the price' (suspensive condition) may prevent the legal binding of the transfer of title. in terms of ownership by the seller: * in a contract of sale, the seller losses and cannot recover the title of the property sold and delivered, actually or constructively, until and unless the contract is fulfilled or extinguished. * in a contract to sell, the seller retains the title, until and unless the full-payment of the price by the buyer with compliance to the pre-conditions at the time set in the contract. Category:Sales Category:Obligations and Contracts